In US trade, the euro responded favourably to comments from Ben Bernanke that stimulus measures from the Fed were still very much on the cards. Heading into the weekend, all eyes and ears were on what Mr Bernanke would say in terms of future quantitative easing measures from the Fed.
While Mr Bernanke did not detail any additional policy tools available to the Fed, or expressly suggest further QE would be announced at the Fed’s next meeting in mid-September, he once again linked future accommodation to the employment landscape for which he said he held a ’grave concern’.
It was this terminology that led the market to believe that an aggressive policy response could soon be on offer. The big question in the eyes of the market is whether that constitutes QE at the upcoming September meeting or after the Presidential elections in early November? While this question remains to be answered, the impacts on the euro were pronounced. The euro surged from an Australian market closing level of 1.25 to a high of 1.2638 before settling at 1.25789.
Resuming in early Asian trade this morning, the euro is modestly weaker after Chinese PMI data over the weekend was in contractionary territory, coming in at 49.2 million, its lowest levels in 9 months. A busy week on the economic calendar, featuring central bank decisions from both the BoE and the ECB, are likely to be key directional influences in the coming days.